Tel Aviv shares turn higher as economy stays open amid Israel-Iran attacks

Tel Aviv stocks erased morning losses and moved nearly 1% higher on Sunday in the first trading session since the start of a wave of missile strikes between Israel and Iran on Friday, as Israel and its economy attempt to remain as open as possible.

The blue-chip Tel Aviv 35 index and broader TA-125 index were up 0.8% in afternoon trading, reversing earlier losses of nearly 2%.

Ronen Menachem, chief markets economist at Mizrahi Tefahot Bank, said the market initially reacted to the outbreak of war as well as significant declines on Wall Street on Friday.

"Trading today and in the coming days will likely depend on developments and assessments regarding the continuation of the conflict — its intensity and duration. The stance adopted by the United States will also be significant," he said.

Government bond prices were up marginally, while the shekel is not trading on Sunday. The Israeli currency weakened to 3.61 per dollar on Friday from 3.5 on June 11.

Israel and Iran launched fresh attacks on each other overnight into Sunday for a second straight day.

Israel said it had targeted Iran's nuclear facilities, ballistic missile factories and military commanders on Friday at the start of what it warned would be a prolonged operation to prevent Tehran from building an atomic weapon. Iran has promised a harsh response and has launched hundreds of missiles into Israel.

NORMAL BUSINESS DAY

Israeli authorities said at least 10 people were killed overnight, including three children, and more than 140 injured by missiles that hit homes in northern and central Israel.

The country's Home Front Command has banned gatherings, with beaches closed and school classes being done remotely, and has ordered people to work from home unless they are employed in essential services.

But the Bank of Israel said Sunday would be a normal business day and banks' main branches would be open. It noted it was ensuring the proper functioning of financial markets, the banking system, and payment systems. "The Bank owns all necessary tools to support business continuity for the Israeli economy," it said.

A Finance Ministry official told Reuters that ultimately eliminating a potential nuclear threat from Iran would be good for Israel and the whole region, but this may require more funding.

"But we are coming into this (conflict with Iran) from a strong position," the senior official in the Accountant General's office said.

"We have all this liquidity in the domestic market, so we're in a strong position to make this happen right now," the official said. "All and all we see the markets are replying ... not in a big way. If you look at the shekel-dollar, it's not a crisis."

The official added it was possible rating agencies may view the military escalation as a reason to lower Israel's credit rating, saying: "It wouldn't surprise me."

Finance Minister Bezalel Smotrich said the ministry had been preparing for weeks and was ready to ensure economic stability. "We are ready to respond and adapt as the situation evolves," he said. "The Israeli economy is strong, stable, and resilient."